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2008] 304 ITR 272 2007] 158 TAXMAN 116 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA Industrial Cables (India) Ltd.* v. Commissioner of Income-tax, Patiala ADARSH KUMAR GOEL AND RAJESH BINDAL, JJ. IT REFERENCE NO. 4 OF 2006 SEPTEMBER 20, 2006 Section 32AB of the Income-tax Act, 1961 - Investment deposit account - Assessment year 1988-89 - Whether provisions of section 32AB are for deduction out of income generated during year and same will not be available unless income during year is utilised for purpose of purchase of new plant or machinery - Held, yes - Whether investment made in plant and machinery out of borrowed funds, would not be regarded as utilization of income during year and would not qualify for deduction under section 32AB - Held, yes FACTS The assessee claimed deduction on account of additions made to plant and machinery during the year under consideration. The Assessing Officer disallowed a part of the amount on the ground that the same was invested by raising loans from the banks and allowed deduction only to the extent of the assessee's own funds. On appeal, the Tribunal affirmed the order of the Assessing Officer, holding that section 32AB(1) does not permit deduction in respect of investment made in the purchase of plant and machinery from the borrowed funds. On reference : HELD A plain reading of the provision of section 32AB(1) shows that the deposit of the amount with Development Bank or utilization for the purchase of any new ship, aircraft machinery or plant has to be out of the income chargeable to tax under the head 'Profits and gains of business or profession'. The object of the provision is to grant benefit on the investments made out of the income generated during the year and not on investments made by raising loans. Only possible conclusion is that the investment has to be from the income of the current year. Section does not visualise or postulate a position where the benefit under this provision can be availed of today even of the income which the assessee may or may not earn in future years. There is no denying the fact that every year is independent and has to be assessed independently. In case deduction is allowed in…

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